Stock of the Week – UnitedHealth Group (21.08.2025)

UnitedHealth Group is one of the largest and most influential healthcare companies in the United States, headquartered in Eden Prairie, Minnesota. The company has maintained its leadership position for years thanks to its broad range of services and strong operational integration. UnitedHealth combines advanced technologies, data analytics, and an extensive network of medical services, supporting healthcare at multiple levels. For years, it has competed with the biggest players in the healthcare industry, standing out through its scale, comprehensive offerings, and operational efficiency.

The Group's operations are based on two key pillars:

• UnitedHealthcare – the largest private health insurer in the U.S., offering private health insurance across the country.

• Optum – a rapidly growing unit providing services in healthcare management, pharmacy services, and data processing and analytics. Optum also develops cutting-edge digital tools, including AI, medical billing automation, and telemedicine platforms.

UnitedHealth Group focuses on implementing modern technologies such as artificial intelligence, predictive systems, and advanced healthcare data platforms. These innovations lead to the optimization of clinical processes, reduction in operating costs, and improvement in medical outcomes.

Throughout 2024, UnitedHealth Group generated $400 billion in revenue, with the Optum segment accounting for $253 billion, making it the key growth engine within the group.

Financial Results for 2024

In 2024, UnitedHealth Group reported $400.3 billion in revenue, representing an 8% increase year-over-year. Although this figure was slightly below analysts’ expectations (around $405 billion), the company maintained stable growth, demonstrating its operational resilience in a challenging market environment.

The company has effectively sustained its revenue growth and demonstrated strong operational flexibility, even amid unexpected disruptions. The Optum segment was a standout performer, increasing its revenue share and rapidly expanding its technology-based services, including AI and medical data analytics.

It is worth noting that despite the difficult environment and current negative market sentiment, the company’s EBIT (operating profit) remains on a growth path. The continued EBIT growth confirms that UnitedHealth’s core business model remains strong, offering a positive signal to long-term investors that the company’s fundamentals remain intact despite the informational noise.

The company’s management has confirmed ongoing development in areas such as ambulatory care, telemedicine, and full digitization of healthcare processes. It is assumed that 2025 will bring improved profitability, driven in part by the restoration of full operations at Change Healthcare and continued benefits from economies of scale and cost synergies across the group.

Market Environment

The U.S. healthcare market is one of the largest and most complex in the world. The health insurance sector is dominated by a few large, integrated companies that offer insurance plans, medical services, and technologies that support health management. UnitedHealth Group holds a leadership position in this market thanks to its broad portfolio, which includes the UnitedHealthcare insurance segment and the Optum medical and technology services segment.

This strong market position is driven not only by the scale of operations but also by a unique model that integrates traditional insurance (UnitedHealthcare) with medical services, data analytics, and drug distribution (Optum). This approach enables the company to effectively manage costs, deliver value to patients, and maintain a competitive edge in the fast-evolving U.S. healthcare environment.

Risks and Threats

Despite its dominant market position, UnitedHealth Group faces several significant risks that may impact its operations, financial results, and long-term stability. Operating in a highly regulated and competitive environment, the company must constantly adapt to changing market conditions. Key risks include:

1. Regulatory and Political Risk
   The U.S. healthcare system is under intense scrutiny from both federal and state authorities. Potential legislative changes may negatively affect the company’s profitability and business model.

2. Rising Cost Pressure and Medical Inflation
   Increasing healthcare costs—including staff wages, technology, and pharmaceuticals—create growing operational burdens. Although the company invests in digitization and automation, rapidly rising costs may limit margins and competitiveness.

3. Technology Risk and Cybersecurity
   As a company heavily reliant on health data and IT systems, UnitedHealth is particularly vulnerable to cyberattacks, data breaches, and digital infrastructure failures. Such incidents may lead to financial losses, regulatory sanctions, and loss of customer trust.

4. High Market Competition
   The U.S. private health insurance sector is highly competitive. Key players such as CVS Health (Aetna), Elevance Health, Cigna, and Centene compete for market share. Additionally, tech companies offering innovative digital health solutions—especially in telemedicine and data analytics—pose new challenges.

5. Geographic Revenue Concentration
   UnitedHealth generates the majority of its revenue in the United States, increasing its exposure to local regulatory, political, and economic changes. Limited international presence reduces the company’s ability to diversify revenue streams and systemic risk.

6. Demographic and Epidemiological Changes
   An aging population and the rise in chronic disease cases increase demand for healthcare services but also generate higher benefit costs, especially under Medicare Advantage programs. This could affect long-term profitability and require changes in care models.

UnitedHealth Group’s Crisis and Recovery Prospects

UnitedHealth Group has faced a serious crisis in recent months, which impacted both its financial performance and market valuation. The tragic death of the CEO in late 2024 shocked the market, and subsequent investigations revealed significant issues with the company’s practices. Antitrust probes and the exposure of “Delay, Deny, Defend” tactics—systematically denying customers’ claims—damaged the company’s reputation and investor trust. As a result, the company’s stock price plummeted by 62% from its pre-crisis highs in 2025.

After years of continuous growth, the company recorded notable declines in revenue and profit, attributed both to negative market sentiment and internal organizational turmoil. The partial withdrawal from controversial claim-denial practices may have worsened short-term results, but it’s also a step toward rebuilding trust with customers and regulators.

Despite the pessimism, there are signs of possible stabilization and future recovery. UnitedHealth’s stock valuation has dropped to levels many experts now consider highly attractive for long-term investors. For example, Warren Buffett’s Berkshire Hathaway recently acquired $5 million worth of shares, and Michael Burry, known for his predictions during the 2008 financial crisis, has also invested. The presence of such institutional investors suggests UnitedHealth may be seen as a company with rebound potential and long-term growth prospects.

Valuation Outlook

This section presents a valuation of UnitedHealth Group using the discounted cash flow (DCF) method, which estimates the company’s value based on forecasted future cash flows. Please note that this analysis is for informational purposes only and does not constitute investment advice or a target stock price.

The DCF model was built over a five-year horizon, with a conservative average annual revenue growth rate of 10.57%. This forecast assumes a gradual increase in demand for healthcare services and expansion in digital health and care management segments. However, growth is expected to normalize over time.

One key valuation parameter is the weighted average cost of capital (WACC), which includes both the cost of equity and debt. Based on current market conditions and the company’s capital structure, the cost of equity was estimated at 7.87%, while other model values were based on five-year historical averages.

Based on these assumptions, the fair value of UnitedHealth Group shares is estimated at $545.18, suggesting an 82% upside potential compared to the current market price. This significant gap between model and market valuations may indicate a substantial undervaluation, driven by reputational issues and investor uncertainty.

It is important to stress that the valuation is highly sensitive to the assumptions made. Below is a sensitivity matrix for revenue growth and WACC changes.

Technical Chart

UnitedHealth Group shares are currently in a medium-term downtrend that began in early 2025 and led to a sharp drop in price. After intense sell-offs between April and May 2025, the stock reached a local bottom around $235, where strong technical support was observed. Since then, a stabilization attempt is underway. From a technical standpoint, a breakout above $300 could open the path for further upward movement, potentially toward $338.

Source: xStation5